What if you work for yourself and your income is unstable? I would recommend trying them out before you slash your budget. You can use the method of paying the current month’s expenses from the last month’s income. In other words, you pay your July phone bill with your June salary. If you have an irregular income, it gives you a month’s leeway, and you could either find ways to complement the coming month when finances are tight, or just live sparingly for the month.
Then the obvious question is: where to start? Because in the first month of using this plan, you must have money from somewhere. I know this might work, but I think you need to gradually transition to this system, saving a little each month until you have the monthly savings costs ready for you.
There is also a method called “60%”. In a nutshell, he advocates for lowering your monthly gross income like this: you only spend 60% of your savings, and you save 40% on debt, which you still have to borrow.
I believe it might work, but I don’t think I can fully support this idea because of my firm conviction that I should not be in debt.
If you have debts, I recommend that you do your best to get rid of them, even if it requires spending 50% of your income to pay them off (for a short time). But if you’re out of debt, this budget idea might well work for you.
What are the types of spending.
- Spending category number 1. These are things like rent, utilities, and groceries. This is not dining out, entertainment, or vacation. Ask yourself, what do you have to pay for in order to survive? These are the items to be listed here.
- Category 2. Then comes the more irregular annual expenses (such as holidays and auto insurance), we divide them by 12 and this number will be our monthly expenses for this category.
- Category 3. Then comes the monthly “entertainment” expenses such as dining out, hobbies, or entertainment that determine how much we want to spend that month.
- Category 4. Finally, there are unnecessary expenses (for example, on a new sofa), add up the total amount we want to save and divide it by 12.
It is necessary to achieve the goal when categories 2,3,4 will practically move to the next month without affecting the budget. Then, according to this plan, you decide, based on your situation, which other categories fall into the order of importance.
This idea works well after the decree, when the parents are likely to have a “debt bubble”. Hope this article will help you.